Significantly scaled up financing for adaptation is a core element of the ongoing international negotiations on climate change.
Ongoing work at the OECD examines the role of the private sector in promoting adaptation in developed and developing countries, the role that public policy may play in furthering private sector engagement in adaptation. For example, increasing access to risk-sharing instruments is an important strand of comprehensive adaptation strategies that will help to engage private sector actors in adaptation, especially since extreme events will become more frequent as a result of climate change. OECD work shows there have already been some promising applications of innovative mechanisms such as index-linked insurance and weather derivatives – for example, the Caribbean Catastrophe Risk Insurance Facility, which combines index insurance with risk pooling (see Economic Aspects of Adaptation to Climate Change: Costs, Benefits and Policy Instruments, 2008).
Private Sector Engagement in Adaptation to Climate Change: Approaches to Managing Climate Risks (2011) provides new insights into how companies are responding to the risks and opportunities posed by climate change. Previous surveys have found high levels of awareness of climate change, but much lower levels of action to manage the resulting risks. This study uses detailed case studies of sixteen companies across a range of sectors to understand why this is: the drivers of change, barriers to action and the wider policy implications. This working paper also exists in French.
At the local level, analysis of microfinance in Bangladesh (see Assessing the Role of Microfinance in Fostering Adaptation to Climate Change, 2010) found that 70% of existing portfolios were related to climate change adaptation. In the longer-term these instruments have the potential to be self-sustaining, but there is a need for public funding to pilot new methods and initiate new projects.
Ongoing efforts at OECD focus on tracking climate change adaptation-related aid. In December 2009 the Development Assistance Committee (DAC) members approved a new marker to also track aid in support of climate change adaptation: this new adaptation marker will complement the existing climate change mitigation marker, and thus allow presentation of a more complete picture of aid in support of developing countries' efforts to address climate change.
For further information:
Adaptation to climate change
Development co-operation and climate change
Catalysing private climate finance and Financing climate change action (portal)